We have a client who is paying £5,000 in rent for their home, and they want to charge all of this against their income on the basis that they operate their marketing business from their home. I have run through the various calculations to arrive at the ‘use of home figure’ (hours worked, floor area, bills, etc.) but they are insisting that the whole £5,000 should go on their tax return as premises costs. Where do I stand if a client insists on putting all of the cost on their tax return; do I simply advise them that it is inappropriate, and file it? 

Arthur replies: 

Show your client HMRC’s Business Income Manual at BIM37928, where it can be seen that the courts do not allow expenditure on personal living accommodation. There is also the well-known case of Mallalieu v Drummond, where dual-purpose expenditure was disallowed.